Democrats to offer student loan rate relief

ANCHORAGE — State Rep. Les Gara says Alaskans trying to improve their education should not have to pay twice as much for a student loan as people buying a used car.

“Right now you can get a used car loan for about two and three-quarters percent,” Gara said. “You can get a mortgage in the four percent range. People who want to go to college or get job training are paying seven percent. Some people have outstanding eight-percent loans.”

Gara and other Democrats in the state House next month will take another shot at providing relief for Alaska postsecondary students. They plan to reintroduce a bill that would have the effect of lowering student loan rates by 3 percent.

Student loans are the second-largest source of debt for Americans, behind only home mortgages, and a tremendous burden for young Americans trying to start families or buy homes, Gara said.

“There are teachers with second jobs who are still trying to pay back their loans,” he said. “There are people with student loans who are trying to buy a house and seven percent is a very, very high rate when you have inflation of less than two percent.”

The measure calls for students who have established a year of Alaska residency to receive an annual reduction of 2.5 percent of their student loan principal. Passage, he said, would strengthen the Alaska economy, help Alaskans prosper and retain more talent.

“The bottom line is, money should not be a barrier to college,” he said. “Money should not be a barrier to job training, and student loan rates are crippling for people.”

A similar bill received a hearing in the House Education Committee but did not come up for a vote to advance.

Postsecondary Education Commission Director Diane Barrans raised financial and operational concerns about the first version of the bill. The measure, she wrote, would provide a new entitlement for new and existing borrowers without an external source of funding to pay for the benefit.

Gara said many of the concerns were addressed in revisions. He was not sure how much it would cost the state.

“Frankly, I’d like to press the student loan corporation a little bit harder to see if they can help cover the interest reduction,” he said.

The University of Alaska Scholars Program, begun under former UA President Mark Hamilton, is another program to retain talent. It awards scholarships to UA campuses to the Alaska high school graduates who finish in the top 10 percent of their class. Gara said other bright Alaskans should be encouraged.

“I just they think that should pay a much more fair rate in this economy when wages are going up at about 2 percent per year,” Gara said.